All posts tagged EU Summit

A seemingly done deal on a comprehensive package of European reforms to be agreed this week remains under some threat amid a political crisis in Portugal and concerns among others about boosting their commitments to the Euro-zone’s bailout funds.

European government heads are gathering in Brussels Thursday and Friday to sign off on the reforms, which have been painstakingly negotiated over a string of summits in Brussels in recent weeks.

European Council President Herman Van Rompuy said Tuesday that with so much advanced work completed, he expects governments to “to finalise it rapidly on Thursday afternoon.”

But circumstances are not conspiring to ensure plain sailing. Here are the issues that will need dealing with at the council.

German domestic politics have a way of overshadowing Europe. And today it’s why we can’t expect a bell-ringing agreement to emerge from tonight’s European Union summit to secure the euro’s future.

EU officials have been quietly warning all week that financial markets shouldn’t set their hopes too high. Some of Germany’s demands for tighter governance and more competitiveness among high-debt countries are to be diluted by compromise.

Germany meanwhile is digging in its heels on allowing a revamped sovereign bailout fund to begin buying up bonds of fiscally weaker nations, replacing the European Central Bank in providing life support for weak government bond markets.

This threatens Portugal, which can’t live without that lifeline because of high debt-servicing costs. Germany also is telling Ireland and Greece to forget about getting to pay below-market rates on their existing bailout loans.

The tangle rises from Angela Merkel’s political headaches at home, her low ratings, regional election losses and late reaction to a cabinet-level plagiarism scandal are stirring disquiet among her Christian Democratic Union party’s rank-and-file.

German voters are still angry about their government having to foot the bill for profligate euro-zone partners, beginning with the Greek and Irish bailouts last year. They let the government know through polls and the ballot box that they want Germany to impose new rules that would prevent future bailouts by making the rest of Europe, well, operate more or less like Germany.

That is why Ms. Merkel has little wiggle room in Brussels, where compromise would be read as collaboration back across the Rhine.

The reception was already getting hostile before the summit formally got under way later Thursday.

Ms. Merkel will confront her colleagues with demands to use treaty changes to crack down harshly on profligate governments and include provision in future bailouts that shifts the burden from EU taxpayers to holders of a country’s debt.

Objecting governments say the EU just doesn’t have time to fiddle with the treaty, which risks opening a Pandora’s box. The Lisbon Treaty, the last iteration of the EU Treaty, took six years to negotiate and another two years to get ratified by all 27 countries.

If Greece is to survive its worst economic crisis in modern times, it really needs to learn to read the markets.

Ever since the Greek crisis made world headlines in October, the Socialist government of Prime Minister George Papandreou has compiled a sad record of failed bluffs, leaks later denied and hasty moves that have caused market pandemonium–sending borrowing costs through the roof and the country to the brink of bankruptcy.

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Athens

Athens needs to clean up its act fast. It plans a U.S. road show at the end of the month to sell $10 billion in bonds. But a previously planned Asia roadshow won’t happen because Greece blew a chance to attract Chinese funds by leaking, and then denying, that it planned to sell debt to Beijing.

In November, officials revealed to local and international media that Athens was working to sell billions of euros in bonds to China in a private placement.

Markets rejoiced. A massive investment from the cash-rich Chinese was seen as a vote of confidence for Athens.